Taxpayers Outspend Private Insurers 3:1 on Climate Disruption Costs

U.S. taxpayers paid nearly $100 billion responding to damages caused by last year’s extreme weather events associated with climate change, about $1,100 per taxpayer, according to an analysis by the Natural Resources Defense Council released on May 14.

By paying nearly $100 billion, taxpayers — through the federal government — spent more on climate change cleanup than on education or transportation, the analysis shows.

Further, the burden to pay for climate disruption has shifted away from private insurers and is falling more heavily on America’s taxpayers. This is occurring at a time when Congress continues to avoid taking action against climate change and instead has cut support to address its causes, the NRDC analysis shows.

“While Congress debates the federal budget, our government is spending more responding to extreme weather made worse by climate change than we are to educate our kids or take care of our bridges and roads,” said Dan Lashof, co-author of the report and director of NRDC’s Climate and Clean Air Program. “In fact, this single-ticket expense now tops the list of non-defense discretionary federal spending.

“And taxpayers are shouldering more of the burden — they are spending three times more than private insurers to pay for recovery from climate damages. Fortunately, the government has tools it can use right now to address these climate risks — without waiting for Congress to act.”

The NRDC report titled, “Who Pays for Climate Change? U.S. Taxpayers Outspend Private Insurers Three-to-One to Cover Climate Disruption Costs,” was released today during a telephone-based press conference. Lashof was joined on the call by Tom Steyer, a clean energy philanthropist and founder of NexGen Action, a firm engaged in political activity on behalf of climate and prosperity. He also founded but has left Farallon Capital Management, LLC.

Federal spending for the drought, storms, floods and wildfires in 2012 totaled nearly $100 billion. Although climate doesn’t show up as a line item in federal spending, the costs of what NRDC calls the “Climate Disruption Budget” equals one of every six dollars spent on non-defense discretionary programs, making it the largest such spending item, the NRDC report shows.

The impact on America’s taxpayers is startling. The insurance industry estimates that 2012 was the second most expensive in U.S. history for climate-related disasters, with damages totaling more than $139 billion. But private insurers only covered about 25 percent of the costs, leaving taxpayers to pay the bulk of the remaining costs – a ratio of about 3:1 in terms of costs borne by taxpayers versus insurers. This shift in liabilities began in earnest following the $72 billion bill to the insurance industry in 2005 from Hurricane Katrina, and has continued to grow since, the NRDC report shows.

“The fact that private insurers are leaving the table sends an unmistakable signal. It tells us that climate change risks are increasing and their costs to our society are climbing,” said Steyer. “$100 billion is a big expense by any measure. Good fiscal stewardship of our country’s future dictates that we should be spending more to combat climate change so we can spend less on cleaning up its impacts.

“President Obama has called on Congress to curb the threat — and rising cost — of climate change and said if Congress balks, he will act. The sooner we make sound investments to curb the pollution driving climate change, the quicker we’ll reduce its drag on the federal budget and our economy.”

For NRDC’s climate disruption costs analysis, click here. For a blog on the issue by Lashof, click here.

Steps the government can take to reduce drivers of climate change include ramping up energy efficiency and reducing carbon pollution. Several months ago, NRDC released a ground-breaking proposal addressing climate change: “Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Creating Clean Energy Jobs, Improving Americans’ Health, and Curbing Climate Change.”

NRDC’s plan would reduce carbon pollution from the nation’s electric power plants, which are responsible for 40 percent of our total carbon emissions. NRDC’s proposal calls on the U.S. Environmental Protection Agency to use the Clean Air Act to set state-specific limits on carbon pollution. States and utility providers would work together to meet the new limits in a flexible system promoting energy efficiency and use of a broad mix of cleaner energy sources.

NRDC’s plan would cut carbon emissions by 26 percent by 2020 at low cost with high environmental and health benefits, and would save utility customers on their electric bills.

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